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In 2009 the World Bank (Reshaping Economic Geography) produced a very insightful map representing travel time to major cities (in hours and days) and shipping lane density.

From the supply chain perspective, this kind of representation can be useful to understand which are the better connected areas and, therefore, final markets and suppliers’ markets. Also, the furthest is the location from a major city the lower are the manufacturing activities. According to the World Bank report, in for worse connected areas Indonesia after 15 km from the district centers the manufacturing activity falls rapidly.

Interestingly there are a lot of dark areas in China, Africa and South America, but also Western U.S. it is not so bright. If you look well there are also a lot of dark spots in India and Europe too.

It would be really nice to see the evolution of these areas since 2009…

Like this:

Lead times are a major concern when selecting suppliers’: lower lead times induce lower inventories and allow being more flexible.

On the other side competitive pressures (lower costs, higher quality, and innovativeness) drive many companies in scouting suppliers abroad and this practice may cause higher procurement lead times mainly because of geographical distances.

Using data gathered in 2005 from 660 companies operating in the manufacturing industry from 21 countries, we analyzed the relationship between global sourcing and procurement lead time.

What we found in our data is the presence of three groups of companies according to the importance given to suppliers’ physical proximity and level of local sourcing:

Group name

Importance given to physical proximity in suppliers’ selection

Level of local sourcing

Globals

Low

Low

Patriots

High

High

Idlers

Low

High

Interestingly, among local sourcing companies, there are those doing this strategically (“Patriots”) and those who don’t (“Idlers”). Our analyses show that Idlers have the worse performance, not only in terms of procurement lead time, but also manufacturing lead time, delivery speed and manufacturing conformance.

On the other side Globals and Patriots are able to keep similar performance. Globals tend to use share more information and use eBusiness tools with suppliers while Patriots rely more on Just-In-Time practices.

In conclusion, this study highlights the importance of choosing carefully a local/global sourcing strategy and to consider how it can be supported by leveraging on right supply chain management tools.